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Comerica Earnings Rise on Fee Income Growth (Update 1)

  • Third-quarter EPS of 78 cents beats consensus estimate of 71 cents.
  • Rise in fee income more than offsets sequential decline in net interest income.
  • Average loans down 2% sequentially but up 1% year over year.
  • Net interest margin and net interest income continue to decline.

Updated from 8:10 a.m. ET with early market action and comment from Sterne Agee analyst Brett Rabatin.

NEW YORK ( TheStreet) -- Comerica (CMA - Get Report) of Dallas reported a decline in average loans but also beat analysts' third-quarter earnings expectations.

The bank reported Wednesday third-quarter earnings attributable to common shares of $145 million, or 78 cents a share, increasing from $141 million, or 76 cents a share, in the second quarter, and $116 million, or 61 cents a share, in the third quarter of 2012.

The third-quarter results came in solidly ahead of the consensus estimate of 71 cents a share, among analysts polled by Thomson Reuters.

A highlight for Comerica in the third quarter was an increase in noninterest income to $214 million from $208 million the previous quarter and $197 million a year earlier. Commercial lending fees rose to $28 million in the third quarter from $22 million, both in the second quarter and in the third quarter of 2012.

The bank's net interest margin -- the spread between the average yield on loans and investments and the average cost for deposits and borrowings -- continued to narrow to 2.79% in the third quarter from 2.83% the previous quarter and 2.96% a year earlier. Comerica continues to see assets reprice lower, as the Federal Reserve has kept the short-term federal funds rate in a range of zero to 0.25% since late 2008.

Third-quarter net interest income was $412 million, declining only slightly from $414 million in the second quarter, but down from $427 million in the third quarter of 2012.

The bank's credit costs continued to come down, with a third-quarter provision for credit losses of $8 million, compared to $13 million the previous quarter and $22 million a year earlier.

Comerica's average total loans in the third quarter were $44.094 billion, down 2% from the second quarter but up 1% from the third quarter of 2012. "The decrease in commercial loans was primarily driven by decreases in general Middle Market, National Dealer Services and Mortgage Banker Finance, partially offset by an increase in Technology and Life Sciences," according to the company. Comerica also said in its earnings release that the "declines generally reflected subdued demand due to economic uncertainty, a seasonal decline in auto dealer floor plan loans and a decrease in mortgage refinancing activity."

In contrast to Comercia's lack of sequential loan growth and slight year-over-year loan growth, U.S. Bancorp (USB - Get Report) of Minneapolis on Wednesday reported core loan growth of 2.2% during the third quarter from the second quarter, with average loans growing 7.5% year-over-year.

Meanwhile, KeyCorp (KEY - Get Report) of Cleveland reported a 1% increase in average loans during the third quarter, with average loans growing 5% from a year earlier.

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